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What Credit Suisse’s Canopy deal means for private banking

For Credit Suisse, this gives its RMs the chance to advise rich clients on their total net worth, not just what they bank with C.S.



Gerald Mackenzie & Urs Lichtenberger, Credit Suisse

Credit Suisse’s inaugural partnership with a fintech company is moving competition in private banking onto the digital battlefield.

The agreement with Mesitis, the Singapore-based company behind Canopy, a client portfolio-aggregation service, reflects an effort at the private bank – now in its third year – to harness digital technology to grow revenues.

The products that top-tier private banks can offer are no longer unique. “But the client experience and the channels to access the bank can be powerful differentiators,” Gerald Mackenzie, director in the Asia-Pacific private banking business at CS, told DigFin.

The immediate goal of adopting Canopy is to provide a convenience for wealthy clients that they can’t get elsewhere, but both the bank and Mesitis have more strategic goals for their partnership.

Credit Suisse’s digital private banking platform has helped it engage more with clients: they are already trading more via the CS app. Canopy lets rich people see their portfolio accounts from multiple private banks on one dashboard. By adding Canopy to the CS online platform for clients, it makes it easier for clients to review their entire holdings across private banks while a few keystrokes away from executing transactions within the CS online environment.

Moving the competitive goalposts
That already makes it dangerous for competitors in Asia Pacific, which may be redesigning their own platforms, but on the status-quo model in which those platforms are silos for proprietary data.

Tanmai Sharma, founder of Mesitis, told DigFin that Credit Suisse will be the first bank to offer its client portfolio data to Canopy on a daily basis. For now, in Asia and Europe, banks are still giving clients monthly account updates via PDF, not via direct electronic connection, on condition of the client’s approval. (Banks do provide electronic feeds to clients in the United States, however, where consumer demand prompted banks to provide this many years ago, Sharma said.)

Even if other banks were eager to open up their customer data to an aggregator like Canopy, it couldn’t happen quickly. The process of getting Credit Suisse to offer daily electronic reports “increased my appreciation of how non-trivial that is,” Sharma said. Legacy booking systems are not synced and a lot of work has to go into configuring a bank’s platform to do this.

(For your inner geek: Credit Suisse will be transferring customer data to Canopy via SFTP, or secure file transfer protocol. SFTP is a better-protected version of FTP, a standard network protocol used to copy a file from one host to another over the internet. This is not to be confused with API, application programming interface, which is a tool to allow one piece of software to be used by another.)

The next steps for Credit Suisse in introducing Canopy should send a chill down the spines of its competitors: the bank will encourage clients to use the bank’s app function to view their aggregate assets across different institutions, including asset classes and geographies, said Urs Lichtenberger, director at CS in Singapore.

“We’d like to have clients give our relationship manager permission to also see that total portfolio, so that we an offer them holistic advice,” Lichtenberger explained to DigFin.

While CS executives were quick to say they would not themselves be downloading competitors’ data through Canopy, getting customers to give RMs permission to look at their total portfolio will give the banks’ reps plenty of insight on their clients’ relationships with competitor banks.

Can rival banks do anything about this? DigFin requested interviews with several peer private banks, but they didn’t respond or said they were too busy. Sharma, meanwhile, is betting on this becoming a ‘if you can’t beat ’em, join ’em’ trend.

Harder than it looks
Citing research by CapGemini, Sharma said 75% of rich people in Asia spread their portfolios among, on average, six banks. So each bank has a view on 10% to 15% of a client’s true worth and asset mix. Today, banks in Asia and Europe typically update clients monthly via a PDF or a paper statement.

Canopy’s customers allow it to take these statements – he says 90% or more of the data is from PDFs – and amalgamate them. He hopes more banks will agree to providing daily electronic feeds, as they often do already in the US, and will have to do in the European Union, whose Revised Payment Service Directive, a.k.a. PSD2, will force banks to open consumer data in 2018.

Some bankers may be wary of sharing customer information with Canopy because it goes against the grain of secrecy, or because they think it will only aid competitors, Sharma said. However, he argues the situation is more nuanced. Many banks are trying to be able to provide their clients with daily updates, but the effort gets superseded by other priorities, often related to compliance. Meanwhile, customers in Asia and Europe haven’t been demanding it, either.

“But now Credit Suisse is doing it,” Sharma said, “and we’re talking to other banks. More of them realize sharing data is actually a competitive advantage. Anything their customer trades with Credit Suisse will get updated the next day.”

Sharma’s goal for Mesitis is for it to become a B2B player. He now tracks US$5 billion of rich people’s ‘assets under reporting’, but he wants to gather more banks’ electronic feeds. “I want to go past paper and accumulate transaction data, ticket sizes and prices. That’s the real thing.”

His data analytics, if given enough to work with, can use aggregated account information to work out how which products enabled clients to make the most money – insight that Mesitis can sell back to private banks, so their RMs can work out what products to sell when, and to whom.

For example: “If your bank has a new bond issue it wants to place,” Sharma explained, “we can help predict which clients are most likely to buy it.”

He added: “I want to help banks make money.”

And the banks, in turn, are also developing technologies to do something similar. Mackenzie and Lichtenberger told DigFin that they are exploring artificial intelligence and cognitive computing solutions that could be applied to a client’s total portfolio, without Credit Suisse having access to the data. Rather the AI could extrapolate (or use aggregated insights from a service as envisaged by Sharma).

Mesitis is Credit Suisse’s first fintech partnership but as the private bank takes the competitive battle into the digital space, its executives expect more to follow.

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